The ABC can now reveal an internal brawl was sparked in the early weeks of the new Government when, in an interview with News Corp, Mr Macfarlane flagged "arm wrestling" the Treasurer over more money for the industry.

"I've won a few, I've lost a few. Let's have that arm wrestle, I'm happy to do it. I'm sure Joe (Hockey) will be clean," he said.

It outraged Cabinet colleagues who said he had turned the heat off Holden and back on the Government.

Holden statement to staff and public, December 6

Most of you will be aware of the media speculation today regarding Holden’s future.

The ABC's report is speculative – our discussions with the government and General Motors are ongoing.

Holden will also appear in the Productivity Commission next Tuesday and is engaged in the process.

We understand how difficult this constant speculation is for employees. As always, any official developments or decisions will be communicated directly to employees first and foremost.

Richard Phillips, executive director of manufacturing

Labor's Nick Champion says the Government is being reckless.

"So it's very, very high stakes that we're playing for in the car industry and we've got a government that's sitting on its hands," he told ABC News 24.

"[Holden is] a massive employer. It's a massive structural part of our economy in South Australia and Victoria and there will be pretty dire effects if we don't get this billion dollars worth of investment, if we don't have production continuing post 2017 through to 2022.

"It will cost South Australians and Victorians very dearly. It will cost jobs. It will destroy wealth."

Car manufacturing: A sector in decline

The Australian car manufacturing sector has been under pressure for at least 20 years.

Soaring production costs and a high Australian dollar have ultimately made it cheaper for most Australian consumers to buy foreign-made cars.

Analysts say 85 per cent of cars sold here are imported.

Mitsubishi ceased local production five years ago, while Ford announced it would cease its production by October 2016.

The shrinking car manufacturing industry is bad news for the Australian economy.

Extensive government subsidies have aimed to prevent it.

Over the past decade, Ford and Holden have shared in more than $12 billion in taxpayer-funded industry assistance.

The Australian government made a $34 million co-investment with Ford in 2012.

The Federal Chamber of Automotive Industries, which represents carmakers, says the industry directly employs more than 45,000 people across the country, but many of those workers will now be wondering how long their jobs will last.